Business

Public floats fall as investor uncertainty prevails

Updated
January 31, 2013 13:43:00

Global economic uncertainty, volatile commodity prices, and weak investor confidence saw the number of companies listing on the stock exchange fall by more than half last year. Of those that did get enough investor interest to list, most were miners. Companies outside the mining industry struggled to get a look in.

Of those companies that were able to generate enough investor interest to float most were miners.

Finance reporter, Sue Lannin, has more.

SUE LANNIN: If you want to take your company public make sure you are a miner.

A new study shows most of the companies who listed on the Australian stock market last year were resources firms.

Marcus Ohm, partner with accounting firm HLB Mann Judd in Perth is the author of the report.

MARCUS OHM: It would be fair to say that 2012 has been a flat year compared to certainly the previous year. We've had approximately half the listings taken place in 2012. We are down to about 43 listings in the small cap market this year. So the small caps are those companies that are under $100 million when they list so it has been a pretty flat market out there for IPOs (Initial Public Offerings) this year.

SUE LANNIN: Why is that?

MARCUS OHM: I think it's really just part of the general market sentiment out there because the market hasn't done well for a number of years, certainly the non-resource companies are finding it very hard to get up in these sort of conditions and it might be that people are exploring alternatives as well in a market where it is difficult to raise funds.

SUE LANNIN: The study found the number of companies floating on the stock exchange fell by more than half in 2012 - 46 firms successfully completed initial public offerings in 2012 compared to 104 in 2011.

Marcus Ohm says companies raise nearly $400 million from listing last year - down from $1.5 billion in 2011.

(Question to Marcus Ohm) How hard is it to have a public float?

MARCUS OHM: Look, it's certainly been difficult out there and we see those figures coming through in terms of the number of companies that have tried to list but maybe not been able to successfully get high subscriptions so they've not been able to place as many shares as they were perhaps hoping.

So some of those IPOs have fallen flat, other companies just haven't potentially raised as much as they were hoping to.

You look at the resources sector, they have to do that. You look at the non-resources sector, well, there is a few other opportunities for them to consider rather than an IPO.

SUE LANNIN: The fall in investor appetite is also seen in figures from fellow accounting firm, Taylor Woodings.

It found that 30 mining companies raised nearly $300 million from IPOs in 2012 compared to $2 billion raised by mining firms listing in 2008 - the height of the boom.

Mike Ryan is managing partner with Taylor Woodings in Perth.

MIKE RYAN: So we saw in 2012 30 companies raised approximately $300 million. The previous year it was 89 companies raising nearly $750 million, so that's a significant drop off and it is an indication of what we are hearing in Perth, that it is difficult to raise equity for junior mining and exploration companies.

SUE LANNIN: Taking your company public is daunting. It's expensive, for example audit fees alone can cost more than $1 million.

Then you have to pay for advisors and you've got to get enough investors.

Dennis Clark is the managing director of gold miner, A1 Consolidated Gold, which listed in June last year.

DENNIS CLARK: In the long run it was a very successful option. At the time it was hard. We were a private company, we had the money in the bank and we didn't necessarily think, thought we should have to do an IPO to go through the process.

SUE LANNIN: Would you do it again?

DENNIS CLARK: I'd probably say no today but depending on a project later on and being aware of what the process is, maybe.